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File name: hp 12c_user's guide_English_HDPMBF12E44 Page: 179 of 209
Printered Date: 2005/7/29 Dimension: 14.8 cm x 21 cm
Appendix B
More About L
Given a sequence of positive and negative cash flows, we hope that there is
enough information to determine whether an IRR answer exists, and what that
answer is. For the vast majority of cases, your hp 12c will find the unique IRR
answer if it exists. But the IRR computation is so complex that if the cash flow
sequence does not meet certain criteria, then sometimes the calculator is unable to
determine whether or not an answer or answers exist.
Let’s look at all of the possible outcomes of IRR as calculated by your hp 12c:
Case 1:
A positive answer. If a positive answer is displayed, it is the only such
answer. One or more negative answers may also exist.
Case 2:
A negative answer. If a negative answer is displayed, there may be
additional negative answers, and there may be a single positive answer. If
additional answers (negative or positive) exist, they can be calculated using the
procedure described below.
Case 3:
The calculator displays
Error 3
. This indicates that the computation is
very complex, possibly involving multiple answers, and cannot be continued until
you give the calculator an estimate of IRR. The procedure for doing so is described
below.
Case 4:
The calculator displays
Error 7
. This indicates that there is no answer to
the computation of IRR with the cash flow amounts you have entered. This situation
is probably the result of a mistake in entering the magnitudes or signs of the cash
flows or the number of times a cash flow amount occurs consecutively. Refer to
Reviewing Cash Flow Entries (page 64) and Changing Cash Flow Entries (page
65) to check and correct the entries.
Error 7
will result if there is not at least one
positive cash flow and at least one negative cash flow.
Although the calculator will eventually reach one of the above outcomes, it may
take a long time to get there. You may wish to terminate the IRR iterative process,
by pressing any key, to see what interest rate the calculator has computed at that
point. If you stop the calculation, you may continue searching for IRR as described
below.
Searching for IRR.
You can continue searching for IRR solutions, even after an
Error 3
indication, as follows:
1. Make a guess for the interest rate and key it in.
2. Press:gt.